Father and daughter, resettled by Oyu Tolgoi. Photo by CEE Bankwatch Network. Used under Creative Commons license

Mongolian livestock herders are worried that a series of massive gold and copper mining projects will dry up scarce water reserves and exacerbate desertification in
the delicate Gobi Desert when operations begin next year to tap one of the world’s largest copper and gold deposits.

A landlocked country of 2.8 million caught between China and Russia, Mongolia is home to the first "cowboys" - nomadic herdsman. Even today, two out of five people in Mongolia still make their living herding livestock, and the same number live in poverty.

Eurasia Capital, a Hong Kong-based investment bank, estimates that Mongolia sits on $1.3 trillion worth of untapped mineral assets. They predict that the country’s gross domestic product could swell from $5 billion to $30 billion by 2020, based on its mineral resources alone.

The biggest project to date - the $6 billion Oyu
Tolgoi gold and copper mine (“Turquoise Hill” in Mongolian) - is now nearly ready to open. Located just 50 miles north of the Chinese border, it is
expected to be one of the world’s three largest mines when it reaches
full production in 2018. Two thirds of Oyu Tolgoi is owned by Canadian-owned Turquoise Hill (formerly Ivanhoe Mines), which in turn is majority-owned by Rio Tinto, the world’s largest private mining company, based in London.

“When
international investors make big decisions to employ their scarce
capital, cutting-edge technology, management expertise, and marketing
prowess, they look for responsible partners,” Oyu Tolgoi’s Australian
CEO Cameron McRae, said. “Partners like Rio Tinto prefer to
invest in countries when the government takes the long view, as we do.”

But critics say that the large-scale mining operations have dire social and environmental costs.

Sukhgerel Dugersuren, head of Oyu Tolgoi Watch, a Mongolian non-governmental organization that keeps tabs on the mine, says the agreement with Rio Tinto is a bad deal for Mongolia. Dugersuren said that the investment agreement the government signed with Rio Tinto is unfair and that World Bank leadership pushed too hard for the Mongolian government to sign on. She told the Bank Information Center in Washington DC that the World Bank extended "too much credit to Mongolia” in support of mining “without implementing compliance monitoring mechanisms or impact assessments.”

“(Oyu Tolgoi) does not understand the dynamics of herding and the need to follow the livestock to adequate pasture and water sources,” the report stated. “It is economically and psychologically difficult for herder families to move from their traditional land.”

Rio Tinto says it is committed to having a “zero impact on community water sources.”

“The water source for Oyu Tolgoi is the Gunii Hooloi aquifer - a deep, non-drinkable water source that is separate from the shallow water sources used by households and animals,” the company states on its website. “Oyu Tolgoi is only allowed to use approximately 20 per cent of the water from Gunii Hooloi, so the aquifer can never be exhausted. We do not need to take water from any other source.”

The government has made a major effort to ban mining in
environmentally sensitive areas but ironically this has the heaviest economic impact on the 100,000 Mongolian
self-employed miners rather than on Rio Tinto. By contrast, Oyu Tolgoi will employ about 3,500 workers when it is fully operational, according to the World Bank.